NEW YORK Oct 23 Former Wall Street gaming analyst Jason Ader tried his hand at activism this year, going to battle with a U.S slot-maker International Game Technology in a successful campaign to win a board seat for his firm. Now he appears to be making a deeper commitment to activist investing.
Ader has merged his Ader Investment Management with hedge fund Cumberland Associates to form a new activist firm called Owl Spring Asset Management, the company is scheduled to announce Wednesday.
Activist investors push for change at companies they believe are undervalued and can provide better shareholder returns through a change in strategy or management.
Owl Spring is beginning operations with about $225 million. Roughly $30 million of the capital is from Ader and Cumberland CEO Andrew Wallach.
Cumberland, established in 1970, specialized in activist investing, though it typically avoided public battles with its targets, instead speaking with management and boards far away from the media glare.
"Cumberland has only once in my recollection taken a public position but we have done plenty of advocacy over the years," said Wallach in an interview on Tuesday. "Now we will be doing the same, but in a more public fashion."
Ader's eponymous firm this year waged a successful proxy battle to agitate for a boardroom shakeup at U.S. slot machine maker International Game Technology. It was the first time the former Bear Stearns gaming analyst embraced an activist-style of investing.
At the same time as he was pushing for change at IGT, Ader was seeking out activist managers as part of a hedge fund seeding business he launched in 2012, which he has since sold. In the process of looking for those managers, Ader discovered Cumberland.
Ader and Wallach are co-CEOs of the new company, which is based in New York.
Owl Spring will focus on the debt and equity of small and medium-cap companies in consumer, real estate, technology, media, telecommunications and natural resources sectors.
The hedge fund is already involved in dialogue with several companies, Ader said, which operate in the leisure, restaurant, retail and energy industries.
The fund's launch comes as activism in the hedge fund industry has come back into vogue, with a slew of new players such as Marcato Capital Management and Engaged Capital rattling corporate cages, alongside veterans of the strategy such as William Ackman and Carl Icahn.
There's been a "a dramatic increase in new activist fund launches over the past year or so," said Damien Park, whose Hedge Fund Solutions tracks activist funds. "In addition, we've seen well-established activist funds add significant capital and successfully launch new investment vehicles," he said.
Park pointed to William Ackman's Pershing Square, which raised a special purpose fund to invest in Air Products and Barington Capital Group, which launched a similar vehicle to invest in Darden Restaurants, the parent of the Olive Garden and Red Lobster chains.
Indeed with the U.S. economy in recovery mode, shareholders are putting more pressure on underperforming companies - especially those with cash on the balance sheet that investors think can be put to better use.
"The environment is ripe for activism as we are nearly five years into a recovery and management has no excuse not to be shareholder friendly and use excess capital to pay dividends or repurchase equity, compared to post crisis when it was understandable for management to horde cash," said Michael Weinberg, a professor at Columbia University's business school and chief investment officer of an investment advisor based in New York.